Your Financial Review of January 2026
When Gold Glitters and Oil Falters: A Year Diversification Won
The year 2025 unfolded in a complex economic and financial environment, dominated by persistent uncertainties and major strategic adjustments. The global situation was strongly influenced by U.S. trade policies, marked by a dramatic surge in tariffs that exceeded 30% in the spring. This protectionist escalation reignited fears of a prolonged trade war, triggering episodes of extreme volatility and one of the worst weeks for the S&P 500 since 2020.
Despite these tensions, inflation remained contained at around 3% in the United States, allowing the Federal Reserve to initiate a monetary easing cycle. The Bank of Canada followed this path, seeking to support a domestic economy facing a slowdown and rising unemployment, which reached 7.1% in August. These decisions helped stabilize bond markets and partially restore investor confidence.
On the financial markets front, 2025 was a year of pronounced geographic rotation. The leadership of U.S. equities gave way to more dynamic markets, notably Canada and emerging countries, which posted gains exceeding 30%. This trend was accompanied by a notable weakness in the U.S. dollar, which ended the year in its lowest quartile since 1980, favoring non-USD assets.
Commodities also played a central role in portfolio performance. Gold posted its best performance since 1980 with an increase of 64.7%, reflecting the search for safe-haven assets in a context of volatility and geopolitical uncertainty. Conversely, oil evolved in an environment of moderate demand, accentuating the divergence between cyclical and defensive assets.
Finally, the year was marked by an acceleration in investments in technology and artificial intelligence, notably by “hyperscalers*” which announced record spending for 2026. This dynamic underscores the growing importance of structural themes in portfolio construction, beyond cyclical fluctuations.
This mix of uncertainties and opportunities shaped a year where diversification remained key for investors. Balanced portfolios between equities and bonds benefited from rate cuts, while real assets and markets outside the United States provided performance levers.
* Hyperscalers are large providers of cloud services (such as AWS, Google Cloud, Microsoft Azure) that operate massive data centers to deliver highly scalable IT infrastructure.
Market review as of December 31, 2025
Fixed Income
The Canadian bond market (FTSE Canada Universe Bond Index) declined at the end of the year, driven by a rate increase caused by employment data that was significantly stronger than expected. For the whole of 2025, Canadian bonds delivered a modest return of +2.6%, lower than in the previous two years. Despite several policy rate cuts by the Bank of Canada, long-term rates edged higher during the year.
For their part, Canadian corporate bonds (FTSE Canada Corporate Bond Index) posted a return of +4.5%, also below the performances observed in 2023 and 2024.
Equities
In 2025, market leadership shifted away from the United States, illustrating a pronounced rotation in performance. U.S. equities (S&P 5001), with an increase of +17.9%, significantly underperformed compared to other regions, notably Canada (S&P/TSX2: +31.7%) and developed economies (MSCI EAFE1,3: +31.9%), which recorded returns above 30%.
In Canada, the S&P/TSX index benefited from the exceptional performance of the materials sector, which surged by nearly 100%, driven by soaring gold prices and other metals such as copper and silver.
Oil & Gold
Oil prices ($US/barrel) fell in December, in the fourth quarter, and for the year as a whole (WTI4: -21%), weighed down by weak global demand while OPEC+5 increased its production.
Conversely, gold prices1 experienced an exceptional surge, with an increase of nearly +65%, almost three times the performance of the global stock index MSCI ACWI1, 6.
Currencies
In 2025, the U.S. dollar recorded one of its worst historical performances, with a decline of about -10% for the DXY1,7 index. However, this depreciation proved more limited against the Canadian dollar. The Loonie still ended the year with a gain of +4.8% versus the Greenback.
1. Returns for the S&P500, MSCI EAFE, MSCI ACWI, DXY index and Gold are expressed in U.S. dollars..
2. The S&P/TSX Index is the leading Canadian stock market index measuring the performance of the Toronto Stock Exchange
3. The MSCI EAFE Index is an equity index designed to measure the performance of equity markets in developed economies other than the United States and Canada.
4. West Texas Intermediate (WTI) Crude oil is the North American standard for setting oil prices. The returns are expressed in US currency.
5. OPEC+ refers to the alliance between the member countries of the Organization of the Petroleum Exporting Countries (OPEC) and ten non-member producing countries, including Russia.
6. MSCI ACWI Index is a stock market index designed to measure the performance of equity markets in 23 developed economies and 24 emerging economies, representing approximately 85% of the global investable equity universe.
7. The U.S. Dollar Index (DXY) is composed of a basket of six currencies weighted against the U.S. dollar. It includes the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona, and the Swiss franc.
Investment Outlook
The year 2026 looks promising for investors, despite a still uncertain political and economic context. According to the central scenario of our CIO Office, global growth should remain close to its potential (60% probability), with an overheating risk (20%) higher than that of a recession (15%). Monetary policies are expected to continue supporting activity, with the U.S. Fed still having room to cut rates, provided labor market stability is maintained. An increase in U.S. unemployment beyond 4.6% would be concerning. As for the Bank of Canada, it appears to have completed its rate-cutting cycle, suggesting that North American policy rates will remain stable, barring any major surprises.
Four factors remain supportive of risk assets: accommodative central banks, resilient growth, strong earnings, and positive momentum. However, relative performance will depend more on profits, which should favor the United States, given its solid track record and favorable outlook. Canada maintains a strong positioning, supported by its cyclical sectors and the persistent weakness of the U.S. dollar.
Artificial intelligence will remain a key driver of markets, but with structural risks. The “hyperscalers” are expected to reach record investment levels in 2026, boosting demand in construction, utilities, and industrial materials. However, this dynamic could exacerbate energy tensions and reignite inflationary pressures, requiring heightened vigilance.
On the asset class side, equities still offer attractive potential, although occasional corrections are likely in case of earnings disappointments or trade tensions. Sovereign bonds should generate returns in line with current rates, while credit remains appealing in the context of low default risk. Gold, after an exceptional year, could disappoint, whereas the Canadian dollar shows potential for appreciation.
In summary, 2026 is expected to be dynamic, driven by favorable tailwinds (monetary, fiscal, technological), but punctuated by challenges: political uncertainties, geopolitical risks, and AI-related volatility. A disciplined approach focused on diversification and risk management will be essential to seize opportunities while preserving portfolio resilience.
We thank you for your trust and remain fully available to discuss these outlooks and support you in optimizing your portfolio so that it reflects your objectives and adapts to market developments.
Sincerely,
Cathy, Guillaume, Marc-Antoine and Inuk
514-871-3474